29.11.11

Marshmallows and Pensions

[An open letter sent to the School of Informatics of the University of Edinburgh.]

We write to urge you to join the strike on 30 November, sponsored by UCU and EIS and timed to coincide with actions by unions across the UK. If you are not a member of UCU or EIS, we urge you to support the strike by not coming in to work and by refusing to cross picket lines.

In 1972, psychologist Walter Mischel conducted an experiment at Stanford University. Over 600 children, aged 4 to 6, were put into a room free of distractions, given a marshmallow, and told they would be left alone for fifteen minutes. They were free to eat the marshmallow, but if they held out for fifteen minutes, they would be given a second marshmallow as a reward. One third held out for the bigger payoff. A follow-up study, 18 years later, revealed that the one-third who deferred gratification were remarkably more successful across a range of activities, including scoring more than 200 points higher on SAT college admission tests. Holding out for the second marshmallow is a salient indicator of success in later life.

If ability to delay gratification correlates with success, one might expect successful people to take a long-term view. For instance, one might expect academics in a leading institution to rate receiving a decent pension more highly than the hassle of supporting a strike. But ask someone in the Informatics Forum if they are planning to strike, and they are likely to say "No, I have a meeting booked for that day." To whom do they owe more? The person they are meeting? Their future self? Or how about future hires, who will be hit hardest by the cuts, and future students, who deserve to inherit a university system that remains world-class?

Over the last year, USS has imposed a drastic cut in pensions: 36% of the value of the pension for Mary, a new lecturer promoted to senior lecturer after ten years; and 12% of the value of the pension for John, someone just like Mary except he's currently employed rather than a new hire. This is a classic divide-and-rule tactic. While staff may be less inclined to fight a 12% cut than a 36% cut, the two-tier system is unfair and unlikely to last: historically, two-tier systems are updated within a few years by moving everyone to the lower tier. Details of the cuts are listed below.

What about our students? EUSA, the student union, is supporting the strike. They know that these cuts will weaken universities. During the last strike, in March, sometimes there were more students than staff manning the pickets. If our students support the strike, shouldn't we support them?

Aren't pensions gold-plated? The UK historically spends less on pensions than other European nations. Private-sector pensions have degraded over the past few decades; we should support efforts to restore those to decent levels, not agree to decimating public-sector pensions as well. It's not fair for public employees to give up their pensions to pay for bank bailouts.

In this day and age, can we afford it? The UK is renowned for its world-class universities: Cambridge, Oxford, Imperial, Edinburgh, Manchester. Look at a list of the top-ten universities in the world, and you will see only universities from the US and UK. That excellence is a huge driver of innovation and growth. If the UK stops its investment in universities, it won't be long before we feel that loss throughout the economy. So the question should be, can we afford to shortchange universities, particularly the younger generation that is hardest hit by these proposals?

It may be easier to give in, but the right plan is to keep our pensions and our universities strong for future generations. Let's hold out for the second marshmallow.

Yours,

Philip Wadler
Nigel Goddard
Alan Bundy

A summary of the changes.

Introduction of a two-tier system. Current staff who pay into the pension fund for forty years receive a pension of one-half their final salary; new hires who do the same receive a pension of one-half their average salary. Basing pensions on average rather than final salary may be sensible, but to do so with no adjustment in multiplier suggests employers are using this as an excuse to slip in a large cut; it means new hires receive about 2/3 the benefits received by old hires. Further, if this follows the course of other two-tier schemes, the upper tier will be eliminated in favour of the lower, and old hires as well as new will see their pension slashed.

Capping cover for inflation. Previous arrangements offered full cover for inflation; new arrangements offer full cover to 5% and half cover to 15%---that is, a 10% increase when inflation is 15% or higher. Inflation averaged 16% per year between 1974 and 1980; a cut of 6% per year over six years compounds to a 31% reduction, lasting over the remaining lifetime of the pension.

Altering the index of inflation. The Retail Price Index (RPI) is replaced by the Consumer Price Index (CPI). RPI is calculated with an arithmetic mean, CPI with a geometric mean, which is always less. CPI runs about 0.7% lower than RPI; a cut of 0.7% per year over twenty years compounds to a 13% reduction.

Changes to conditions. Staff that take a career break of 30 months will be demoted from the final-salary to average-salary scheme, about a 1/3 cut; this particularly affects women. The same will happen to staff that are made redundant, a double whammy: if you lose your job, you also lose a large proportion of your pension.

Good luck with this fight. We had the same in France two years ago, we were basically 2 or 3 millions in the streets at least 5 times and they basically sent us to hell.Now, our pensions will be based on 20 years average of salary, meaning much less, no automatic inflation adjustment, meaning much poorer and of course we'll have to work 42,5 years. For an academic like me who got his position at 34, that means I'll be able to get retirement around 76 unless they decide I'm too old and I'll get kicked out at 65 with much less money. Great.And all of that because I value teaching and researching more than programming in some IT company.

No one will force me to believe that this move is not the result from the lack of a competitive ideology. Now that communism's dead, noone needs to prevent revolutions and such, so noone needs to provide a welfare state anymore.

Sorry for my rant, but I'm pissed to see we're all screwed. Sorry for being rude.

I didn't see you protesting when the nation was rocking with welfare scams.

..when people were abusing the welfare system to rip others of their hard earned money.

..when people were demanding handouts as their rights.

..when governments kept printing money and racking up depts to appease such people in the name of altruism.

..when the printed money started circulating in a banking system and turned into casinos.

..when governments encourage banks to ignore objective assessment for the sake of their welfare votes.

..after the inevitable crash when governments *socialised* the bank's debts and effectively spread the consequences of actions of welfare hounds into everyone who had worked hard and didn't live on handouts .

If you consider major crisis events that triggered the financial meltdown, one that would pop up is sub prime lending collapse. The key cause for this event is the government intervened in the markets to set up backing for loans to done to people who can not afford. The politicians used this as a voting mechanism to attract people who could not afford the loans in the name of welfare.

Similarly in UK the bloated spending of NHS, State funded education have merely created massive debts with poor returns (see news of babies dying at maternity units or the evening standard's campaign to teach basic literacy skills - meaning the state had failed). The state took over these in the name of providing welfare, sucked up all the money in the system and screwed/screwing it. Compound this with the fact of we are paying extra due to the high inflation /higher taxes to fund various welfare handouts. Basically if you are not in the recv. end of these handouts you are being sucked of your wealth.

The governments were able to get away because ppl love welfare and govt.s can simply turn on the printing presses. Ppl who were on the receiving end of various welfare options kept their mouth shut despite knowing that they don't deserve it and just because the money came from government doesn't hide the fact it is somebody else's money. see infuriating stories of how people scammed the welfare system to buy two houses etc.

The govt. takeover of RBS was done in the name of welfare socialism. intact it has only made ppl who did not cause the crisis (money savers, hard earners) pay for those who were living on govt. sponsored welfare handouts(thats the various repackaged forms of sub prime loans).

If you are unhappy with govt. intervention/mismanagement of your wealth then you should have raised your voice for all the above. No point in raising your voice only when your freeloading tap is closed.

@Pk I asked you for evidence. Not surprisingly, you offer none. (What you have offered is derisory.) I didn't "see PW protesting" when the UK went to war with Iraq (I'm not claiming he didn't) but if he protests about war, I won't trot that out as a reason for him "to stand alone". You write a lot but say little or nothing (other than some generic right-wing waffle that you've cribbed from the Evening Standard [sic] or similar). When you enter adulthood and go out into the world, perhaps you'll learn to calm your hysteria with some fact-based reflection.

@Pk (just another way of writing "Anon"): Here is a summary of your contribution: I read some crap in the Evening Standard (or similar), unthinkingly spewed it out on this page in a childish tantrum, and now can't back it up -- so, to try and save face, I'll throw out some random drivel about The Guardian and then run away. Well Pk, perhaps, someday, you'll be man (or woman) enough to expose your own thoughts to the same "criticism" that you feel free to apply to others. In the meantime, I wish you the best of luck in the Disney-world you live in!